The Tax Foundation's State Business Tax Climate Index was released this week. No surprises here: The 10 best states in this year’s Index are: Wyoming 2. South Dakota 3. Nevada 4. Alaska 5. Florida 6. Montana 7. New Hampshire 8. Indiana 9. Utah 10. Texas The absence of a major tax is a common factor among many of the top ten states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax. Wyoming, Nevada, and South … [Read more...]
How Long Can Your Nest Egg Last?
I clicked through this lifespan calculator offered by Northwestern Mutual. Just click here to calculate your lifespan. Drawing down 1% per quarter (4% annually) from a portfolio is a good way to help avoid outliving one's money. Take a look at the chart below to see the effects a lower withdrawal rate will have on the lifespan of your savings. A $10,000 investment in 1945 would have lasted 54 years at a 4% annual withdrawal rate, but an 8% annual withdrawal rate would have burned through the nest egg in a mere 16 years. That's not enough for today's retirees who are living longer and … [Read more...]
Does this Look Like Austerity to You?
The machinations and hand wringing from Euro-area politicians and bankers over austerity imposed by Germany in return for bailouts has masked the reality that Euro-area countries are quickly piling on government debt. Since the end of 2008 Euro-area debt as a percentage of GDP has risen from 70.8% to 96.4% with no end in sight. Does this look like austerity to you? … [Read more...]
Stocks Down 400 Points
"I was at the post office today and overheard someone comment that the stock market was way down, something like 400 points," wrote a client to me last week. "I just wanted to let you know we'll be heading south for the winter and I need you to change my address. Glad to know you're handling my money and not me!" It's interesting how some investors live and die by the daily swings in the market. They either have too much riding on it, or enjoy watching it fall because they got out six years ago at the bottom and can't believe how they've missed the boat. Both feelings are rotten and not … [Read more...]
Market Collapse: Last Mango in Paris
“If the phone doesn’t ring it’s me” -- Jimmy Buffett Are we having fun yet? Since peaking at 17,279.74 on September 19, the Dow Jones Industrial Average Index has lost 6.6% of its value. If you haven’t been investing very long, this is what it’s supposed to feel like. During bull markets it’s easy to say “I’m a contrarian” or “I’m in it for the long-term.” It’s harder to actually do. I manage investments for successful Americans like you— the real people—for a living. You may be surprised to hear this, but my phone hasn’t been ringing a lot over the last couple of weeks. I’ve spent many … [Read more...]
A Darn Good Track Record
I always have money in the stock market and I always will. I don’t get worked up about big swings in stocks because I also have money in bonds. The bonds tend to go up when stocks fall and vice versa. This balanced approach is best illustrated with my favored Vanguard Wellesley fund. The fund has been down for the year only 6 times since 1971 and so far this year it’s up. But even if Wellesley were to be down this year I would never sell it. The fund has a knack for making money in the year following a down year. That’s a success rate that makes me comfortable in any market. … [Read more...]
Teach a Grandchild How to Invest: Part II
As I recommended to you in part I, make sure statements are mailed to your grandchildren so they can stare at the changes in value of their accounts every month. Watching it go down from time to time is preferable. That way they'll build two invaluable skillsets. The first is persistence. When I was a kid, my grandmother would come over every Monday for dinner. “Guess how many clambake tickets I sold this week?” she would ask. This wasn’t just a summer thing for her to raise money for her church. It was a year round personal challenge to see if she could beat last year’s total. And she did … [Read more...]
Bond Kings
My favorite bond funds are not known for their king like managers. And I like it that way. One would think that the world renowned Bill Gross (whose compensation reached $200 million in years past) could make things work at PIMCO. But with interest rates so low, it was getting too hard for him to make a difference. In this interest rate environment, the only way a bond fund manager is going to make a difference is by taking on more risk than his competition. It’s not rocket science. But I have a feeling investors aren't going to be comfortable with these risks, as I explained here. … [Read more...]
GNMA Up Over 2% Yesterday
I like your odds with Vanguard GNMA. Yesterday, with the DJIA falling 1.4% and the speculative Nasdaq down 1.6%, good 'ole GNMA was up about a half of a percent or 2% relative to the Nasdaq. For the year, GNMA is up 5.25% and yields 2.56%. Sometimes the difference between an ok investor and a great one is that the great one is able to take the ups and downs of the market. In the real world it's hard to do. But by having a little GNMA in your back pocket it becomes a whole lot easier. And more fun. … [Read more...]
Sell Your House and Laugh Your Way to the Bank
I've always felt that buying a home when I was young made sense. I know putting money in the stock market instead of buying a house can be more profitable, but I didn't have any money at the time so that really wasn't an option for me. When I was starting out and working at Fidelity Investments, I worked out a deal to buy a three-family house with very little of my own money. I remember how hard it was asking my dad for a loan (it was less than $5,000) and working out the payment schedule. I rented out the top two units and lived in the bottom one, renting two of the three bedrooms in … [Read more...]
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